zara supply chain model

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  • 8/11/2019 Zara Supply Chain Model

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    ZARA SUPPLY CHAIN MODEL

    The company, Inditex, has two dozen manufacturing plants in Spain and more than

    1,160 stores in 34 countries from the United States to Japan.

    Zara developed a business model that incorporated the following three

    goals for operations:

    Develop a system the requires short lead times,

    Decrease quantities produced to decrease inventory risk

    Increase the number of available styles and/or choice

    ZARA has 3 sales formule:-

    short lead time =more fashionable clothes lower quantities= scare supply

    more styles=more choice &more chance of hitting it right

    50% of the products Zara sells are manufactured in Spain, 26% in the rest of Europe,and 24% in Asian and African countries and the rest of the world..The company candesign a new product and have finished goods in its stores in four to five weeks.It canmodify existing items in as little as two weeks. Shortening the product life cycle meansgreater success in meeting consumer preferences..Zara maintains a design team of 200people, all of which produce approximately 12,000 new styles per year for Zara.

    SHORT LEAD TIMES:keeping up with fashion by focusing on shorter response times,zara can quickly identify and catch a

    winning fashion trend. Trend identification comes through constant research not just traditional

    consumer market research ,but a daily stream of emails and phone calls fromstores to head office.

    Zaras machinery can produce a response in terms of a new style or modificationwithin 2-4 weeks.

    REDUCING RISKS Zara not only reduces its exposure to any single product but also creats an

    artificial scarcity to reduce the quantity manufactured in each style

    The result is that Zara discount only about 18 per cent of its products.LEADERSHIP IN NUMBERS zara produced more style,roughly 12,000 a year that enables them to offer

    choices in more current fashions than many of its competitors.Zara core competitive advantage High products turnover Low level of inventory due to fast supply chain Efficient distribution system

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    Commitment of its employees Scanning of the fashion and market trends, and meeting the consumer demand

    relating to fashionable clothes Flexible production system

    ZARA GARMENT SUPPLY CHAIN

    DESGIGN PURCHASING PRODUCTIONDISTRIBUTION RETAILING

    ZARA SUPPLY ZARA obtains 40% of its fabrics supply from another Inditex owned subsidiary. 50% of the fabrics are produced undyed 60% of the fabrics come from a range of 260 other suppliers

    OWNERSHIP AND CONTROL OF PRODUCTION ZARA manufactures 50% of its products in its own network of 22 Spanish

    factories 18 of which are located in and around the La Coruna complex These factories use 500 sewing sub-contractors in very close proximity to La

    Coruna The other half of its products are produced from 400 outside suppliers, 70% are

    in Europe.KEEPING COST DOWN

    ZARA Relies more on having prime retail location than on advertising forattracting costumers

    ZARA spends 0.3% of its sales on advertising compared to an average 3.5% ofcompetitors

    Only about 18% of ZARA clothing doesnt work with its costumers and has to bediscounted, thats half of the industrys average which is 35%.